Discuss the issue of vertical integration. Refer to the various motives that can lead to vertical
integration.
- Consider then the following quantitative exercise. A monopolist upstream firm (1) produces an
intermediate good with no costs. A monopolist downstream firm (2) uses this intermediate good as
an input to produce a final consumption good, whose market demand is Q = 60 p2. The cost
function of firm 2 is made of a fixed cost of 5 plus the cost of the intermediate good. We assume
that the intermediate good is used in the production of good 2 as follows: 2 units of the
intermediate good are needed for each unit of production of the final good 2. Compute the total
aggregate profits of firms 1 and 2, and price p2 for the final good. Argue and check that aggregate
profits are lower than they would be if the two firms chose to vertically integrate, and that the price
of the final consumption good 2 would be lower if the two firms vertically integrated..
do by handwriting Continuous random variable X has th.pdf
1. do by handwriting
(Continuous) random variable, X has the density function f(x)={2(1x),0,for0x1elsewhere (a) Sketch
the graph of this p.d.f. (b) Determine and sketch the graph of the distribution function of X. (c) Find
i. P(0X0.5) ii. P(0.25X0.75) iii. P(X=0.75) iv. P(X0.75) (3+3+(4+4+2+2)=18marks)
